Evolving Employment: The Top 8 Retirement Strategies for Educators

Trent Bradshaw CFP®, AIF® & Brandon Rogers CFP®, AIF® |

Educators have an unusual mix of potential income sources in retirement. As a teacher, you're likely to be eligible for a defined-benefit pension plan. Whether you teach in a public school or nonprofit private school, you’ll also typically have access to a defined contribution retirement plan, such as a 403(b) or 457(b).

However, unlike most other Americans, you may not be eligible for Social Security retirement benefits. About 40% of teachers do not pay into the Social Security system, according to research group Bellwether Education Partners, making them ineligible to claim benefits once they retire. Here are some retirement moves that educators should consider.


1) Seek Expert Help

Two good places to begin your search for educator-relevant retirement advice are the websites of the teachers association and the Teachers Retirement System in your state. Through those, you should be able to connect with retirement or benefits counselors familiar with your state's programs. Their advice is usually free of charge. Beyond the free help, you may want to hire a financial advisor to prepare a more comprehensive analysis of your finances.

2) Save Beyond Your Pension

Payouts vary based on the teacher's length of service, their earnings history, and other specifics of the plan. But the amounts generally fall well short of most teachers' financial needs in retirement. So, as early as possible in a teaching career, it's wise to begin setting aside some money to supplement your expected pension, such as through a defined contribution plan.

3) Consider Defined Contribution Plans

The most commonly defined contribution plan for teachers is the 403(b) plan. Closely resembling the 401(k) plans of the private sector, a 403(b) lets you have money deducted from your paycheck and put into investments that you choose. Your contributions are generally tax-deductible, and your investment earnings are tax-deferred; you pay tax on that money only when you make withdrawals in retirement.

If you work for a public school district, you may be able to participate in a 457(b) plan in addition to or instead of a 403(b) plan. As with 403(b) plans, your 457(b) contributions come directly out of your salary, and your money grows tax-deferred until you withdraw it.

4) Know Your Social Security Options

If you're unsure whether you're contributing to Social Security, a quick glance at your payroll deductions will clarify the matter. You may also qualify for Social Security if you’ve worked in the private sector, but it typically takes at least 10 years of private-sector work to earn enough credits to qualify for benefits.

5) Government Pension Offset

Your own participation aside, you might be eligible for spousal Social Security benefits if you're married and your spouse pays Social Security taxes. However, if you also have a pension, benefits received through your spouse might be reduced under government pension offset (GPO) rules. Typically, Social Security benefits will be reduced by two-thirds of the monthly pension amount.

6) Weigh Working After You Retire

If you expect to teach part-time, work in another profession part-time, or start a full-time encore career, think about how that income might affect what you need to save today. To play it safe, it's best not to base your financial plan on the assumption that you’ll continue to earn income from work after you retire.

7) Ensure You'll Have Enough Insurance

Continuing to work after you retire can also be a cost-effective way to keep health insurance and other coverage you may need, at least until you're eligible for Medicare at age 65. For example, if you received life or disability insurance as an employee benefit while you were working, make sure you still have enough coverage, and if not, supplement it with a private policy, after you retire.

8) Put Your Money to Work

Invest what you can and seek advice from professionals. Ask the state counselors or other teachers in your area to recommend advisors who have specific expertise in helping teachers. They will be able to help you invest in the way that best suits your goals and needs.


Adapted from Investopedia